More than milk price: Fonterra

26 Jul, 2018 12:00 PM
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New approach: Fonterra Australia managing director Rene Dedoncker, centre, with Fonterra suppliers Tony Marwood and John Dalton.
“If there are no step downs, we would have to open more conservatively.
New approach: Fonterra Australia managing director Rene Dedoncker, centre, with Fonterra suppliers Tony Marwood and John Dalton.

Farmgate milk prices will not be the only way that Fonterra competes for farmers’ milk supply, Fonterra Australia managing director Rene Dedonker says.

Speaking in Warrnambool, Mr Dedoncker said its recently launched Farm Source program offered farmers an array of benefits extending from farm management advice through to discounts on products such as fuel, health insurance and Fonterra products.

“The future is just not about price,” he said.

He said more than 1000 of its suppliers have signed on with the Farm Source program, which was pleasing.

Mr Dedoncker said Fonterra was also consulting more with farmers since the impact of its milk price cuts in 2016.

“From that day on, we have not had a price change without farmers being involved,” he said.

While Saputo has eliminated price step downs, Fonterra has declined to do so.

“If there are no step downs, we would have to open more conservatively,” Mr Dedoncker said.

On the higher price range forecast for Fonterra’s New Zealand suppliers compared with that for its Australian suppliers, Mr Dedoncker said Fonterra had sought to give Australian suppliers more price certainty since the price upheavals of 2016.

“We open (with a price) in 90 per cent of our forecast (in Australia),” he said.

The forecast NZ$7 maximum price converted to about A$6.43, higher than the $6.20 Fonterra has forecast for its Australian suppliers.

Mr Dedoncker said the NZ forecast price range was more variable because NZ had a different product mix and exported more than 90 per cent of its production, with the exchange rate playing a big part in margins.

Fonterra Australia only exported about a third of its production and was less exposed to global variability, he said.

On the expansions by Bega Cheese and Saputo in the Australian dairy industry this year, Mr Dedoncker welcomed the moves.

“The industry is much better placed,” he said of Saputo and Bega Cheese’s purchases of former Murray Goulburn plants.

“The only way Australian dairy can be truly competitive is if we are a stronger industry.

“We need to grow. Fonterra has that aspiration and we need other like-minded companies to invest,“ Mr Dedoncker said.

He said he did not think Saputo had bought Murray Goulburn to fight with Fonterra for a bigger share of the Australian market.

“There’s only so much market in Australia that will be fought over. They are looking for opportunities offshore,” Mr Dedoncker said.

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